Major Patent Reform Finalized

Major U.S. Patent Reform Finalized

After six years, a few false starts, and several iterations of proposed reforms, the United States has finalized the most significant revision of U.S. patent law in several decades. The America Invents Act (H.R. 1249) was signed into law by President Obama on September 16 at a math and science magnet school in Alexandria, Virginia. This legislation was approved on a bipartisan basis and the primary sponsors were Senator Patrick Leahy (D-VT) and Representative Lamar Smith (R-TX). The goals are to promote innovation and long-term job growth by speeding up patent application processing times, increasing patent quality, and decreasing litigation.

One of the most notable changes made by the new law is transitioning the basis on which patents are awarded from a “first-to-invent” system to a “first-to-file” system. The new first-to-file system – sometimes referred to as “first-inventor-to-file” – brings the U.S. system in line with general international practice. Disagreement exists within the business community over this change based on a concern that a first-to-file system might favor larger companies over small businesses and sole inventors, although the frequency of disputes over which party should be able to file for a specific invention has been relatively small in practice.

The legislation also creates and modifies procedures for challenging applications and issued patents. It expands the availability of prior commercial use as a defense against patent infringement. It authorizes the U.S. Patent and Trademark Office (PTO) to open a new satellite office in addition to the planned office in Detroit (and the competition is on with Silicon Valley, Austin and potentially others vying for this new office). For more details on these and other provisions, a summary of the legislation is available here.

As was the case with many industry groups, SEMI member companies had a range of views on different elements of the patent reform proposals. An important area of agreement, however, was the need to provide adequate resources to the Patent and Trademark Office.

There is a backlog of over 700,000 patent applications pending at PTO. Accordingly, it can take several years for an application to work its way through the process. While the PTO is self-funding based on fees collected, over $800 million in PTO fees have been diverted to other government agencies over the past twenty years. Since these funds could help address the patent backlog and other challenges, many interested groups have been working for years to end this fee diversion.

During most of the six-year debate on patent reform, the proposed end to fee diversion was non-controversial and widely supported. As it became clear that this legislation had a good chance of passing, some members of the House Appropriations Committee raised concerns on this issue. A heated disagreement over the differing House and Senate approaches threatened to derail the bill. Ultimately, negotiators agreed to the House proposal that creates a reserve fund for PTO fees but does not go as far as the Senate bill in committing that the PTO will retain access to all fees collected. The specifics of this compromise have resulted in some skepticism that PTO will keep all fees and this issue will be closely watched by the patent community.

SEMI has long supported an end to PTO fee diversion. Looking ahead, we are working with other interested groups in Washington to support the needed funding for the PTO as it seeks to reduce the backlog and processing times and to increase patent quality. SEMI also is working directly with the Patent and Trademark Office to provide training about our industry and to work together to promote intellectual property rights around the world.